DEFINITION of 'Lemon Laws'

Lemon laws are regulations that attempt to protect consumers in the event that they purchase a defective vehicle or other consumer products or services, referred to as lemons, that does not meet their purported quality or usefulness. Lemon laws apply to defects that affect the use, safety or value of a vehicle or product. If the product cannot be repaired successfully after a reasonable number of attempts, the manufacturer must repurchase or replace it.

BREAKING DOWN 'Lemon Laws'

Lemon laws vary by state. These laws often cover new vehicle purchases, but can be applied towards other purchases or leases. The consumer may have a limited window of time in which to report that their purchase as a lemon. For example, in Illinois, where lemon laws only apply to new and leased vehicles, the timeframe is 18 months from the date of delivery.

How Lemon Laws are Applied

The federal government, as well as state governments, enacted laws designed to reduce lemons problems. Sometimes these laws are labeled lemon laws by legislators, particularly when they are designed to provide a process by which consumers can rectify recurring problems they experienced after purchasing a car, boat or other large-ticket item.

Depending on the jurisdiction where the issue arises, the consumer may lodge a complaint through a state or other entity seeking some sort of remedy to the matter. This may lead to arbitration procedures and hearings where the reasonable efforts to repair the vehicle or product must be shown.

For example, the North Carolina Lemon Law applies to new cars, trucks, motorcycles and vans bought in the state, and requires manufacturers to repair most defects occurring within the first 24 months or 24,000 miles.

Not all lemon laws are labeled as such. The federal Magnuson-Moss Warranty Act requires sellers of products that include full warranties to fix any problems with these products within a reasonable time and without charge. The Texas Deceptive Trade Practices Act (DTPA) applies to a potentially wide swath of activity that could cause lemons problems. The DTPA allows consumers to sue for triple damages if they suffer a harm as a result of buying a good or service they would not have bought if the seller had disclosed negative information he knew at the time of the sale. The federal Dodd-Frank Act passed in the wake of the 2008 financial crisis established the Consumer Financial Protection Bureau, the mission of which, in part, is to protect consumers from lemon investments.

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